What designers need to know about the government’s Winter Economy Plan

In a statement to the commons the chancellor has announced the successor to the furlough scheme, as he urged listeners to “learn to live without fear”.

Chancellor Rishi Sunak unveiled the next steps of the UK’s economic recovery from the coronavirus pandemic in a statement to the commons today.

Labelled the Winter Economy Plan, support announced by Sunak includes a new Job Support Scheme to succeed the furlough scheme when it ends in October and an extension of the Self-Employment Income Support Scheme (SEISS).

For the last six months, the government has offered several support packages to the public in a bid to mitigate the effects of the coronavirus pandemic. Alongside the SEISS and furlough scheme, this has included a range of business loans.

According to the latest government statistics, some 9.6 million jobs have been furloughed at a cost of £39.3 billion, and a further 2.6 million self-employed people have been supported to the tune of £13 billion.

What comes next?

Sunak has been unwavering in his belief the furlough scheme should be finite. This comes despite several countries, including the likes of France and Germany, having made the decision to extend their own version of the support well into the future.

For months there has been speculation about what the winding down of the scheme, known formally as the Coronavirus Job Retention Scheme or CJRS, could mean for the many millions who are still unable to return to work.

Now we have an answer as to what comes next.

The Job Support Scheme

The Job Support Scheme will begin on 1 November and run for six months. It has been designed to protect “viable jobs”, where businesses are facing lower demand over the winter months. Under the scheme, the government will contribute to the wages of workers who have had to take on fewer hours owing to this lower demand.

Employers will continue to pay the wages of staff for the hours they work, but for the hours not worked the government and the employer will each pay one third of employee’s equivalent salary. Crucially, employees must be working at least a third of their usual hours and the grant is capped at £697.92 a month.

Mike Hayes, tax partner at accountancy firm Moore Kingston Smith explains to Design Week how this might look for a designer on £25,000 with this table.

Total

£

Paid by employer

£

Paid by HMRC

£

Salary for work performed 8,333.33 8,333.33
Payment for work not done 11,1111.11 5,555.55 5,555.55
Total (after tax) 19,444.43 13,888.88 5,555.55

This aims to stop businesses making workers redundant, so design businesses which have seen their work dry up temporarily may want to take note. However it still counts on there being some level of cashflow into businesses, so they can hold up their end of the deal – for the 16% of design businesses which have lost all their work, this could seem hard to manage.

SEISS extension

Parity between employees and self-employed workers has been a point of contention throughout the coronavirus crisis. Today’s speech offered an equal standing in terms of the level of support being offered, according to the chancellor.

The extension of the SEISS will be provided to those who are eligible for the grant and who are continuing to actively trade but face reduced demand because of the pandemic.

It will offer an initial lump sum to cover the time period between November 2020 and January 2021 and will be worth 20% of average monthly profits up to a total of £1,875. An additional second grant will be available for the period between February and April 2021, but information on how much percentage-wise this will be of average monthly profits is yet to be decided.

As self-employed workers will no doubt be aware, this is significantly lower than previous support sums.

Tax deferrals

Alongside its two flagship schemes, the government also sought to soften the economic blow of the pandemic with other offerings like tax deferrals and loan schemes.

Sunak announced today that up to half a million of the businesses which chose to defer their VAT bills this year will be given “more breathing space” as the postponed date approaches. In total, some £30 billion of VAT was deferred this year.

The Treasury is offering up the option for instalments – 11 smaller interest-free payments over the course of the 2021-22 financial year – rather than paying a lump sum at the end of March.

Additionally self-assessment taxpayers, of which there are some 11 million in the UK, according to the government, will benefit from a further deferral. Payments that were originally for July 2020, and those due in January 2021, will now not be due until January 2022.

Loan extensions

A similar approach has been adopted in the face of government-back loans. Bounce Back Loans, first announced back in April, have given more than a million small businesses a £38 billion boost.

But with no end in sight, repayment plans now have the chance to be extended from six years to ten. Any business in real trouble can also choose to make interest-only payments or suspend repayments altogether for up to six months.

As for Coronavirus Business Interruption Loans (CBILS), the government guarantee on these is being extended to ten years too. This, Sunak says, will make it “easier for lenders to give people more time to repay”.

Finally, all loan scheme deadlines are being extended to the end of the year to give people to get on board with support before the start of 2021. Come January, Sunak has hinted at a successor loan programme which will take the place of the current system.

Is there cause for optimism?

Hayes says the new announcements are to be welcomed.

“This new scheme will be particularly valuable to many agencies where they want to retain staff ready for when the upturn commences” he explains.

Design Business Association (DBA) CEO Deborah Dawton is similarly optimistic about the Job Support Scheme, saying it “could well save jobs”. However, she adds that it will require careful consideration from businesses.

What Dawton was pleased to hear about, she tells Design Week, was the changes to repayment terms for loans. This is something the DBA has been lobbying for, she says, since “cashflow is critically important for design businesses.”

Or should designers be more sceptical?

Jack Tindale, design and innovation policy manager at thinktank Policy Connect, is decidedly more cautious about what all this might mean for designers, however.

“While it will at least briefly slow the rise in unemployment, it will not prevent it,” he says. The program itself will not do much in isolation to work as a short-hours work scheme – that is to say, encouraging employers to cut hours, rather than jobs – as at present, firms would find it cheaper to employ one person on full time wages, than two people part time.”

Tindale does note that when combined with the £1,000 Job Retention Bonus announced during the “mini-budget” earlier this summer, this is somewhat of an appealing incentive. But commenting on what is on offer for the self-employed, Tindale says that the 20% support package is a “significant reduction”.

“The reality of COVID-19 is one that is placing unprecedented strain on government finances across the world,” he says. “The Chancellor’s statement will do much to assist firms in the run-up to Christmas, but the sad reality is that – for many people – it may only seek to delay the inevitable.”

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